Industrial relations and social dialogue
Romania: Latest developments in working life Q4 2019
16 March 2020
Romania
Article
A proposal to use the living wage as the basis for setting the minimum wage and amendments affecting the labour market following a change in government are the main topics of interest in this article. This country update reports on the latest developments in working life in Romania in the fourth quarter of 2019.
Living wage to be standard for setting wage policies
In October 2019, the Romanian parliament passed a bill that sets the living wage as the main criterion in establishing the minimum wage and wage policies in general. The proposed law provided for a detailed list of the expenditures included in the calculation of the living wage and an exact formula for calculating the living wage value every year; both the list of expenditures and the formula were based on an independent study undertaken in 2018. [1]
In 2018, the living wage was RON 2,552 (€548 at the exchange rate of October 2018) for a single person and RON 6,762 (€1454) for a household of four (two adults and two children under 14). In 2019, the living wage increased to RON 2,621 (€544 as at 12 March 2020) for a single person and RON 6,954 (€1443) for a household of four. [2]
The proposed law was sent for approval to Romanian President Klaus Iohannis who sent it to be re-examined by the parliament in November 2019. While the proposed law was not endorsed by the president, the living wage became a reference point in trade unions demands. During the consultation with government on the statutory minimum wage, the National Trade Union Confederation (Cartel Alfa) argued that the minimum wage calculation formula should be calibrated to achieve a convergence between the statutory minimum wage and living wage within a time frame of eight years.
New government increases minimum wage
After the collapse of the Social Democratic (PSD) led government following a no-confidence vote in October 2019, a centre-right government, led by the Prime Minister Ludovic Orban of the National Liberal Party (PNL), took over until the next national elections scheduled for 2020. Several changes affecting the labour market were undertaken by the new cabinet, including the removal of the over-taxation on part-time contracts. The new government also came up with a formula for calculating the minimum wage based on inflation and labour productivity.
The trade unions criticised the new government’s proposal. Cartel Alfa said the minimum wage should grow to RON 2,260 (€465), as agreed with the former Social Democratic government. [3] The National Trade Union Bloc (BNS) proposed an even more substantial increase, to RON 2,284 (€474). [4] Trade unions also criticised the minimum wage increase calculation formula. Both Cartel Alfa and BNS stated that the inflation rate was calculated based on the month of October 2019 instead of the forecasted inflation rate for 2020. Secondly, they felt that the formula referred to the overall labour productivity and not to the hourly productivity of employees (except self-employed and family workers, that represent about 25% of the total workforce). The two organisations proposed a formula that includes among criteria for inflation and labour productivity, as well as the living wage, so that annual increases of the minimum wage will eventually align it with the living wage.
Following consultations with social partners, the government increased the minimum wage to RON 2,230 (€463) from RON 2,080 (€432) and abolished the differentiated minimum wage for university graduates. The gross minimum wage for the construction sector, set in 2019 through a separate Emergency Ordinance to RON 3000 (€623), was not increased.
Outlook
The parliamentary debates on the social dialogue bill were suspended due to political instability and the presidential electoral campaign, but the negotiations will be relaunched in the new parliamentary session in February 2020.
Regarding the law on living wage, since the Social Democratic Party still holds the majority in parliament, the most probable scenario is that parliament will pass the law again in 2020. The president cannot send a law for re-examination to the parliament a second time, and therefore will be obliged to endorse it.
Footnotes
- ^ Friedrich Ebert Stiftung (2018), Coșul minim de consum lunar pentru un trai decent pentru populația României , Bucharest.
- ^ Friedrich Ebert Stiftung (2019), Coșul minim pentru un trai decent, actualizat pentru anul 2019 , Bucharest.
- ^ Cartel ALFA (2019), Punctul de vedere al CNS Cartel ALFA privind salariul minim brut garantat în plată pentru 2020 , 4 December.
- ^ Blocul National Sindical (2019), Comunicat de presă: Blocul Național Sindical a solicitat Guvernului creșterea salariului minim brut pe țară garantat în plată la 2495 lei , 29 October.